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Investing in solar for your home performs equally to Dow Jones

Let’s take all the solar feel-good aside and look at investing in a grid tied solar system for your own house. Since I live off-grid I’ll use my old house in Napa as an example:

The city house – 1,400 sq. ft. used 5,000 kW-hours per year. This is at the very low end of energy consumption for solar to pay off – yet look at the surprising results below.

Here is a quick calculation of annual energy production from a 3.5kW array (14 panels):

Nominal array wattage

3,500

W

Real array wattage*

2,625

W

Total annual charging hours

2,000

hours

Total annual kW-hours produced

5,250

kW-hours

*Panels on average produce about 75% of the stated wattage.

The projected life-span of a solar system would be 25 years.

The anticipated energy bill for the next 25 years would be $27,000 factoring in an annual 3% rate/inflation increase. Currently it’s $0.15/kW-hours from PG&E.

I found this very useful solar calculator online: http://www.solar-estimate.org/index.php

The net cost of a system is $11,400 after rebates etc. The payback time is 13 years and the internal rate of return is 7.3%.

Most 401k funds would be very content producing such a return to their customers. Let’s look at Dow Jones’s performance the past 25 years in comparison:

The inflation adjusted return is 7.9% since 1990 – a 25 year period. In other words a very comparable financial return to investing in solar.

What you don’t get from investing in Dow Jones index is an increased house value from your solar system (that is property tax exempt) and more over you can also feel good about saving 100 tons of CO2 greenhouse gasses over the lifespan of the system.